The adoption of the Farming Act in the United States in December 2018, which legalized technical hemp at the federal level, had a significant impact on the cannabis industry. Due to the increase in the area under crops, a sharp drop in the price of cannabidiol is observed.
A kilogram of CBD costs $ 4,133
In the period from October 2018 to August 2019, the price of pure CBD decreased by 56% (from 9,740 to 4,133 dollars per kilogram). Experts attribute the negative trend to the development of hemp breeding in the United States. According to a Hemp Gazette report, this year the area of hemp farmland increased by 455% and reached 206,390 hectares. In practice, however, cannabis was only sown on 93,000 hectares.
Kush.com portal director Chase Nobles predicts a collapse in the cost of cannabinoids in the global market due to an increase in the number of cannabis growing and processing enterprises. If all American farmers who have received a license for plant cultivation plant cannabis, then the cultivated area will almost double (compared to the current figure), which will lead to a significant increase in the volume of production of raw materials.
The situation in the American hemp market will affect the European industry
According to experts, this year the volume of cannabidiol products in the United States will reach 4,700 tons, which is eight times higher than the demand. Therefore, economists predict a decrease in the cost of raw materials and, as a result, a five-fold drop in the yield of cannabis cultivation (from $ 50,000 to $ 10,000 from 0.4 hectares of crops). An oversupply of products in the US market will have a domino effect on the European industry. Between August 2018 and August 2019, the average cost of CBD in Europe almost halved, completely reflecting the dynamics of changes in the price of cannabinoid in the United States.
Technavio conducted a study of the global cannabis market and concluded that a price war broke out between large enterprises in the industry. The reason for this phenomenon was an increase in the difference between supply and demand. The head of one of the European hemp companies said that they have to reduce the cost of CBD every month due to an oversupply of products. Now the price of cannabidiol is in free fall, and experts can not determine to what point cannabinoids will fall in price.